I met an unusual hospital administrator the other day.  He has actually begun posting ranges of prices for some procedures.  Truly remarkable.  He is concerned about the abuses of the so-called “not for profit” hospitals in his state and would actually like to see a more market-based model.  Truly remarkable.  

He said two things I found very interesting.  He said that any move to render healthcare service and delivery an “uninsurable event,” would drive the price to the floor.  He said that other than those conditions or hospitalizations that resulted in the most out of control costs, everything else, to the extent possible should ideally be paid for by the patient as they are able, the result of which would be a plummeting of the price of health care.  I know.  Not the typical hospital administrator.  

Second thing.  He confirmed what I have always suspected regarding contract negotiations between many insurance companies and the big corporate hospitals, the not-for-profits, in particular.  He said the conversation goes something like this:

Hospital administrator to insurance exec:   “You exclude the following facilities from your network and I’ll significantly discount the amounts charged to your carrier group.”  He said that this is standard operating procedure, particularly when the gorilla hospital is the only facility in the region that provides certain specialized services, services without which the insurance carrier can’t claim to offer a full range of services to their insured.

Sound like a cartel?  In some instances, the carriers (insurance companies) actually have the upper hand, particularly when there is a redundancy of services provided by the big hospitals.  They then play the hospitals off of each other.  Some insurance companies actually demand that the hospitals charge their insurance competitors’ insureds more, making that particular insurance company less competitive in the marketplace!

I’ve always thought this was the case but didn’t know for sure until I met this unusual hospital player.  He didn’t like a lot of what I had to say and isn’t following this blog, but I’ll thank him here anyway.

G. Keith Smith, M.D.